Proposed California Law Takes Aim at "Rent Now, Pay Later" Services

A bill proposed in California's state legislature would regulate and restrict "rent now, pay later" (RNPL) services, whereby a lender advances a tenant's residential rent. The bill would impose strict limits on payment structure, fees, credit reporting and marketing, and mandate clear, multilingual disclosures before enrollment.

The proposed legislation, California Assembly Bill (AB) 2350, recently passed the California State Assembly and may soon become law. In anticipation of its enactment, RNPL providers and real estate operators should begin to proactively align leases, resident communications, payment operations, vendor agreements and staff training to the law's requirements.

Overview: What the Law Does

AB 2350 would amend California's Financial Code to add a new article titled "Rent Now Pay Later Services" regulating loans used to advance residential rent payments. If enacted, AB 2350 would impose significant limits.

First, under the bill, RNPL providers could neither permit nor require that a single rent advance be repaid in more than two installment payments. If a two-installment repayment plan is used, a provider would be required to allow the consumer to select the date of the second installment payment, provided the date is within 30 days after the first installment. The bill would also give consumers the right to select a new date for the following month's second installment payment, requiring providers to allow payment scheduling flexibility month to month. Consumers would have the right to pay the amount owed in full at any time.

Second, the bill would restrict the fees that could be charged to consumers. Fees for missed payments would be capped, with the amount of the cap set at 50 percent of the subscription fee or flat fee if the RNPL product uses such a model, or 0.5 percent of the rent amount if not. Servicers would generally be prohibited from charging consumer service fees, except for actual transaction-related pass-through costs (e.g., credit card transaction fees). Significantly, providers could not charge interest or other charges on late fees or remaining balances. 

Third, AB 2350 would prohibit RNPL providers from imposing minimum subscription terms or other retention incentives. In other words, the bill would give consumers the right to end the RNPL service at any time.

Fourth, the bill would regulate collection practices. Automatic withdrawal attempts from consumers' bank accounts would be limited to one attempt per account, and failed attempts would require immediate consumer notice. Further, under the bill's framework, consumers would have until the fifth day of the month after origination to cure a missed payment, and providers would have to suspend service until the borrower becomes current. The bill would also restrict delinquency reporting to consumer reporting agencies, to an extent consistent with federal law.

Finally, AB 2350 would impose detailed pre-enrollment disclosure and advertising requirements. Servicers would need to provide plain-language, multilingual disclosures identifying all fees, itemizing rent-amount charges and explaining that lease grace periods remain separate from RNPL cure periods. Advertising "0 percent APR" would be specifically prohibited unless the service carries no interest, flat fees or subscription fees.

Who Does the Law Impact?

AB 2350 would apply most directly to third-party rent-advance finance companies and servicers. However, it would also impact residential landlords and property managers that advertise, offer, recommend, integrate or process payments through those companies.

What Businesses Need to Know About Complying with AB 2350

If enacted in its current form, AB 2350 would impose varying obligations and restrictions on RNPL providers, property owners and property managers. Participants in each facet of the market should take proactive steps to ensure they are prepared to comply with the law's requirements.

Third-Party Finance Companies and RNPL Providers

Third-party finance companies are the primary target of AB 2350. A company would be covered under the bill's definition of an RNPL "provider" if it is a "finance lender or servicer that provides a loan to a consumer for the purpose of advancing residential real property rent payments" and performs covered functions such as providing disclosures, managing payment dates, initiating automatic bank withdrawals, furnishing information to credit reporting agencies or charging subscription fees.

If covered, financing companies would need to structure their RNPL products around the bill's substantive restrictions. The service could not permit more than two installment payments. Companies would need to cap missed payment fees depending on whether their models include subscription or flat fees – and may wish to reconsider their fee structures considering the cap formula. Servicers would need to examine any service fees that they charge consumers in order to assess whether such fees represent actual transaction costs that can properly be passed through; if not, the fees would need to be eliminated. Likewise, companies would need to ensure that any interest or other charges charged on top of late fees or remaining balances, as well as any minimum subscription or term length, are discontinued. RNPL providers would need to update their consumer contracts to reflect each of these changes to their practices.

The provider or servicer also would need to build specific servicing functionality to allow consumers to select the date of their second installment, subject to the 30-day limit after the first installment, as well as to pay in full at any time. Moreover, providers may need to update their backend coding and implement safeguards in order to ensure compliance with the restrictions on automatic bank withdrawal attempts.

Providers also must take care to comply with AB 2350's new disclosure obligations. Before enrollment, the RNPL provider must supply clear disclosures understandable by the "least sophisticated consumer," including all fees and possible fees, an itemized list of every charge included in the rent amount, and a clear explanation that the landlord's grace period is separate from the RNPL cure period and that failure to cure a late rental payment will result in penalties as specified in the rental agreement. Those disclosures must be available in Spanish, Chinese, Tagalog, Vietnamese and Korean in addition to English.

Multifamily Property Owners

For ordinary residential landlords, AB 2350 does not appear to impose direct operational duties merely because a tenant uses a rent-advance product. Because the bill's obligations are focused on "providers" or "servicers" that provide loans to consumers, a landlord that simply receives rent – whether from the tenant, a third-party finance company or a payment processor – would generally not be the regulated "provider" unless it is itself providing or servicing the loan.

However, landlords would be affected in several practical ways. Most importantly, the bill expressly requires RNPL disclosures to explain that any lease grace period is independent of the time that the RNPL servicer gives the consumer to cure a missed RNPL payment. In other words, a tenant's cure rights with the RNPL company would not automatically extend the lease's rent due date, landlord grace period or late-fee deadline. Landlords should therefore make clear in leasing materials and rent notices that use of an RNPL service does not change rent obligations under the lease unless the landlord expressly agrees.

Landlords should also be cautious about co-marketing. If a landlord advertises or recommends an RNPL product – especially with claims such as "0 percent APR," "no fee," "avoid late fees" or "protect your credit" – those statements should be vetted against the bill's requirements and the RNPL vendor's actual fee model. Even if the bill's direct duties fall on the provider, misleading consumer-facing statements could create risk under other existing laws, such as California's Unfair Competition Law.

Property Management Companies

Property managers occupy a middle position with respect to AB 2350's impact. If property managers merely collect rent for an owner and accept payment from an RNPL provider, AB 2350 likely does not directly regulate them as providers. However, the more a property manager participates in offering, embedding, advertising, administering or supporting the RNPL product, the more compliance risk it assumes.

Property managers should separate lease enforcement from RNPL servicing. The bill gives consumers until the fifth day of the month after the RNPL service originated to cure missed RNPL payments, but that cure period does not necessarily match the lease grace period. Property managers should train staff to ensure communication with tenants about RNPL participation is clear and accurate, such as avoiding telling residents that RNPL enrollment extends the lease grace period, prevents late fees, prevents notices to pay or quit, or shields them from lease consequences.

Contracting Implications for Property Owners and Managers

For real estate operators using RNPL vendors, AB 2350 should be addressed primarily through vendor diligence and contract controls. Landlords and property managers should require RNPL providers to represent that they will comply with AB 2350 if enacted and that they will maintain compliant disclosures, avoid prohibited credit reporting, comply with fee caps and auto-withdrawal limits, and control all APR or "no fee" marketing claims.

Agreements also should clarify that RNPL providers are solely responsible for loan origination, servicing, consumer disclosures, payment scheduling, failed-payment notices, credit reporting and consumer complaints relating to the financing product. Conversely, landlords and property managers should preserve their separate lease rights and avoid assuming duties that could make them appear to be servicing the loan.

Legislative Status and Enactment Timeline

AB 2350, introduced by Assemblymember Tina McKinnor (D-Los Angeles County), passed the California State Assembly on May 21, 2026, and was ordered to the State Senate, where it has been referred to the Senate Banking and Financial Institutions Committee and the Senate Judiciary Committee.

For more information or specific questions regarding the bill's provisions, please contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.